Chapter 11 Quiz
The CPI is more commonly used as a gauge of inflation than the GDP deflator is because
the CPI better reflects the goods and services bought by consumers
In 1979 and 1980,
the U.S. inflation rate as measured by the CPI was higher than that measured by the GDP deflator, and the difference was explained by rapidly rising oil prices.
The goal of the consumer price index is to measure changes in the
cost of living
Will's expenditures on food for three consecutive years, along with other values, are presented in the table below. If the nominal interest rate was 8 percent in 2010, then
the real interest rate in 2010 was 3 percent
Sue Holloway was an accountant in 1944 and earned $12,000 that year. Her son, Josh Holloway, is an accountant today and he earned $210,000 in 2013. The price index was 17.6 in 1944 and 218.4 in 2013. Josh Holloway's 2013 income in 1944 dollars is
$16,923
Harry spent $39,000 in 2009 and $42,000 in 2014 on goods and services. The consumer price index was 220 for 2009 and 231 for 2014. Harry's 2014 spending in 2009 dollars is about
$40,000
Will's expenditures on food for three consecutive years, along with other values, are presented in the table below.
$6,380
Arlo is offered a job in Des Moines, where the CPI is 80, and a job in New York, where the CPI is 125. Arlo's job offer in Des Moines is for $42,000. How much does the New York job have to pay in order for the two salaries to represent the same purchasing power?
$65,625
Changes in the quality of a good
can lead to either an increase or a decrease in the value of a dollar
The CPI is a measure of the overall cost of
the goods and services purchased by a typical consumer
The steps involves in calculating the consumer price index and the inflation rate, in order, are as follows:
- fix the basket - find the prices - compute the basket's cost - choose a base year and compute the index - compute the inflation rate
The following table shows the prices of good X and good Y for 2013-2015. In addition, assume the basket of goods used to compute the Consumer Price Index consists of 3 units of good X and 4 units of good Y. If the base year is 2014, the value of the Consumer Price Index in 2013 is
58.8
